WMES3314: Electronic Commerce

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WMES3314 Electronic Commerce

• Chapter 3
• Market Opportunity Analysis

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Framing Market Opportunity Content

• Questions answered in this chapter
• What is the market opportunity analysis
  framework?
• What are the two generic value types?
• How do we identify unmet and/or underserved
  needs?
• What determines the customer segment a company
  will pursue?
• How to access Advantage Relative to Competition
• Who provides the resources to deliver the
  benefits of the offering?
• How to access market readiness of Technology
• How to specify opportunity in Concrete Terms
• How do we assess the attractiveness of the
  opportunity?

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Unique market Opportunity Analysis for Online
Firms

• The market opportunity analysis for online firms
  is different from the traditional because
• Competition Across Industry boundaries rather
  than within boundaries
• Competition between alliances of companies rather
  than between companies
• Competitive developments and response at
  unprecedented speed
• Unique ways to bring value to customers and
  change behavior

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What are the two generic value types?

• The first step is broadly to identify the
  business arena in which the new business will
  participate. We need to understand some key terms
  before we get into the 2 value types
• Value Chain Businesses are made up of discrete
  collections of individual and organizational
  activities that work together to create and
  deliver customer benefits via products and
  services.These integrated services describe a
  value chain.
• Value System A value system is an
  interconnection of processes and activities
  within and among firms that creates benefits for
  intermediaries and end consumers.

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Porters Value Chain Model
Objectives To examine each step of production and
determine how value is added to each step To
encourage decision makers to examine the bigger
picture in the industry
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VALUE SYSTEM

• A firms value chain is part of a larger stream
  of activities, which Porter calls a Value
  System.
• Includes the suppliers that provide the
  necessary inputs AND their value chains.
• The Value System Model is used to
• Evaluate a companys process and competencies.
• Investigate whether adding IT supports the value
  chain.

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CASE Frito Lay uses IT the Value Chain

• Worlds largest snack food producer and owner of
  Pepsi products.
• SIS System
• Integrates marketing, sales, manufacturing,
  logistics, finance.
• Provides managers with information about
  suppliers, customers competitors.
• Enables employees to access valuable information.
  
• Frito Lays use of IT allows for an optimal
  functioning of the value chain.

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What are the two generic value types?(contd)

• Firms should look at the value system with a lens
  that yields ideas about new business
  possibilities. Specifically a firm looks for the
  following types of values to be introduced.
• 1.) Trapped Value New economy companies have
  unlocked trapped value by
• Creating more efficient markets, e.g eBay
• Creating more efficient value systems, e.g.
  Federal Express
• Enabling ease of Access, e.g. Guru.com.
• Disrupting current pricing power, e.g.
  BizRate.com.

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What are the two generic value types?(contd)

• 2.) New to the world value In addition to
  reconfiguring existing value chains, new-economy
  companies can create new-to-the-world benefits.
  These can enhance an existing offering or be the
  basis for creating a new offering. Companies can
  do it in 5 generic ways
• Customize offerings, e.g. MyYahoo
• Radically extend reach and access, e.g. Keen.com
• Build community, e.g. MyFamily.com
• Enable collaboration among multiple people across
  locations and time, e.g. Autodesk Inc.s
  ProjectPoint
• Introduce new-to-the-world functionality or
  experience, e.g. C-Mode vending machines
  (sells tickets information).

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• Framework for Market Opportunity Analysis

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Group play role E-ticketing
1.

• 4 Keys Environment
• Customers
• Company
• Technology
• Competition

2.
3.
4.
5.
6.
7.
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Venn Diagram Opportunity Analysis

• Once the 7 steps of Market Opportunity Analysis
  have been performed, a company should ideally
  pursue the opportunity that fall in the sweet
  spot.

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Venn Diagram Opportunity Analysis

• Sweet Spot means
• There is an unmet customer need
• The company has available resources
• Competition is weak
• Technology is able to deliver the benefit
• In practice, firms can only find opportunity near
  the sweet spot
• The technology is not perfect
• There is more competition than would be ideal
• There is an unmet need but perhaps not a critical
  unmet need.

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Step 1 - How do we identify unmet and/or
underserved needs?

• We need to consider the following
• 1.) Customer decision process The customer
  decision process maps the activities and choices
  customers make in accessing a specific experience
  within value systems.
• The following questions will help structure the
  process
• What are the steps that the typical customer goes
  through?
• Who gets involved and what role does he or she
  play?
• Are there any distinct and significant activities
  and paths that different customers go through?

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How do we identify unmet and/or underserved
needs? (contd)

• 2.) Revealing unmet or underserved needs
• The following questions should be considered
• What is the nature of the ideal experience the
  customer wishes to receive both functionally and
  emotionally?
• How closely does the actual experience compare to
  the customers view of the ideal? What are the
  key frustration points? What compensating
  behaviors do we observe? What underserved needs
  do you observe?
• What barriers block some or all participation by
  potential customers? What would potentially block
  adoption of an online activity?

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Step 2- What determines the specific customers a
company will pursue?

• Segmentation is the process of grouping customers
  based on their similarities.
• Approaches to market Segmentation
• Demographics For individuals, the demographic
  approach includes grouping by age, gender,
  occupation, ethnicity, income, family status,
  life stage, internet connectivity and browser
  type.
• Geographics Country, city, size, density, ISP
  domain, etc.
• Behavioral Online offline shopping behavior,
  web usage, website loyalty, prior purchases, etc.
• Occasion Routine occasion, special occasion,
  time, location, event, trigger, etc.
• Psychographics Lifestyle, personality, affinity,
  etc.
• ..

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Actionable Segmentation Meaningful Segmentation
In order for a customer segmentation to be
effective, it must be meaningful, actionable,

• Customers must demonstrate needs, aspirations or
  behavioral patterns that are similar within a
  segment and different across segments
• A distinction between a price sensitive and a
  quality seeking segment is meaningful, since the
  two segments demonstrate distinguishable sets of
  needs

Meaningful
Actionable

• A company must be able to reach customers within
  each segment through effective and targeted
  marketing programs
• A customer segment consisting of customers with
  blue eyes is not actionable, since it is very
  hard to identify and reach only customers with
  blue eyes

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Actionable Segmentation Meaningful Segmentation

• Actionable segmentation To be actionable,
  segmentation must be consistent with how a
  company can go to market, and must be able to be
  sized and described. Actionable segments meet the
  following criteria
• The segments are easy to identify
• The segments can be readily reached
• The segments can be described in terms of their
  growth, size, profile and attractiveness

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Actionable Segmentation Meaningful Segmentation

• Meaningful Segmentation To be meaningful,
  segmentation must help describe and begin to
  explain why customers behave in a specific way.
  Meaningful segments meet the following criteria
• Customers within a segment behave similarly while
  customers across segments behave in different
  ways
• It provides some insight into customers
  motivations
• It corresponds with how customers currently buy
  or use the product or service
• It correlates to differences in profitability or
  cost to serve
• The segments and/or their differences are large
  enough to warrant a different set of actions by a
  company

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Step 3 Assess Advantage Relative to Competitors

• Must understand the context of competition at the
  industry level and specific competitors at the
  individual company level.
• Identify online competitors is both easier and
  more difficult than offline competitor
• Search engine
• Across traditional industry boundaries
• Direct competitors
• Indirect Competitors, e.g. Keen.com,
  Britannica.com
• Read Textbook Exhibit 3.6, 3.6 (page 92-93)
  Competitors of Kodak

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Step 4 Assess the Resources of the Company to
Deliver the Offering

• Company Resources
• Chapter 4 Resource System
• Customer-facing brand name, multiple
  distribution channel
• Internal technology, product development,
  experienced staff
• Upstream customer relationship to its suppliers,
  partnership.
• Partners Capability Gap
• Complementary Partners Companies who provide
  offerings that are complementary to those of
  another company. e.g. Intel Microsoft
• Capability Partners Companies that give and
  receive value from partnering with the company.
  CISCO Mesiniaga

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Step 5 Assess Market Readiness of Technology

• Technology Adoption
• High level judgment on technology transfer
• Sufficient? Finance?
• Impact of New Technologies
• What new technologies could radically alter the
  economics?
• Your target customer/competitors will use these
  technologies?

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Step 6 Specify the opportunity in Concrete Terms

• Opportunity story
• Target segment within selected value system
• Spell out the expected elements of customer
  benefits
• Identify critical capabilities and resources
  needed to delivery in 2.
• Lay out the critical reason in 3 competitive
  advantage.
• Categorize the critical capabilities as in-house,
  build, buy, or collaborate
• Provide financial opportunity

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Step 7 Assess Opportunity Attractiveness

• Clear picture of market opportunity
• Attractiveness based on the
• Unconstrained opportunity, e.g. eBay
• Segment Interaction, e.g. Zoomerang.com
• Growth Rate of annual growth of customer
  market
• Market Size e.g hand-made cello
• Profitability profit margin of eBay nearly 80!

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Summary

• 2 Generic Values Value Chain Value System
• Framework for Market Opportunity Analysis
• Step 1 Identify the Unmet and/or Underserved
  Customer NeedStep2 Identify the Specific
  Customers a Company will Pursue
• Step 3 Assess Advantage Relative to Competition
• Step 4 Assess the Companys Resources to Deliver
  the Offering
• Step 5Assess Market Readiness of Technology
• Step 6Specify Opportunity in Concrete Terms
• Step 7 Assess Opportunity Attractiveness